Discount to Maintain Margin Calculator
Use this discount to maintain margin calculator to see how a proposed discount affects your profit margin and the maximum discount you can apply before selling at a loss.
| Product Cost (£) | |
|---|---|
| Current Selling Price (£) | |
| Proposed Discount (%) |
How Discounting Affects Profit Margin
Most sellers focus on revenue, not margin. The problem is simple: when you reduce price but your cost stays fixed, margin falls immediately. The formula is:
Margin = (Price − Cost) ÷ Price × 100
After a discount, the selling price changes, which changes the denominator in the equation. Even a modest 10-20% discount can significantly reduce percentage margin.
Example
If your product costs £10 and sells for £25, your margin is 60%. Apply a 20% discount and the price becomes £20. Your new margin drops to 50%. Same product, same cost - lower margin.
Maximum Discount Before Loss
Your break-even point happens when selling price equals cost. Any further reduction creates a loss.
Maximum Discount % Before Loss:
((Price − Cost) ÷ Price) × 100
This tool calculates that threshold so you know exactly how far you can discount without losing money.
If you need full break-even analysis across fixed costs and fees, use the Break-Even Calculator (Seller Version).
Why Marketplace Sellers Must Be Careful With Discounts
Platforms like Etsy, Amazon and eBay charge percentage-based fees. When you reduce price, your fee may reduce slightly, but your margin usually shrinks faster than expected.
If you're unsure how fees affect real profit, read: How Marketplace Fees Affect Your Profit Margin.
Before running promotions, calculate whether you’re protecting profit or just increasing volume.
Discount Strategy vs Margin Strategy
High Margin Products
Products with 60%+ margin can absorb deeper discounts without hitting loss territory.
Low Margin Products
Products under 30% margin have very limited discount flexibility.
Bulk Promotions
If you're adjusting prices across many SKUs, use the Bulk Price Increase Calculator to recover margin before running promotions.
Frequently Asked Questions
How do you calculate margin after a discount?
Calculate the new discounted price first, then apply the standard margin formula.
What discount can I offer without losing money?
The maximum safe discount equals your current gross margin percentage.
Does discounting increase profit?
Only if higher volume offsets the reduced margin per unit.
Should I discount low-margin products?
Generally no, unless it's a strategic loss-leader or inventory clearance.